By 1917 the Australian Flying Corps (AFC) consisted of four operational squadrons which outstripped the ability of the Army's Central Flying School at Point Cook to supply sufficient trained airmen. It was decided, therefore, to establish training squadrons within the AFC. Four such squadrons were established in the United Kingdom during 1917.

5 Squadron AFC was formed at Shawbury in the United Kingdom in June 1917. It was original identified as 29 (Australian Training) Squadron, Royal Flying Corps, but was renamed, along with all of the Australian squadrons, in January 1918. The squadron relocated to Minchinhampton in early April 1918 and disbanded in May 1919.

The squadron's principal role was to prepare personnel for service with what was at first 67 (Australian) Squadron, RFC, and subsequently 1 Squadron, AFC, which formed part of the air component of the British and dominion forces operating against the Turks in Palestine. The squadron operated a variety of aircraft types throughout its history and these are listed below.